Key Takeaways
Risks exist — handle with caution
Bringing an employee into a private room and using “if you don’t resign voluntarily, the company will proceed with disciplinary dismissal” as a bargaining chip to request voluntary resignation is not absolutely prohibited by law, but it carries risks and requires very delicate handling.
If mishandled, the employee may subsequently claim that their resignation was made under duress, and the court may find that the employer abused its economic advantage to coerce the employee into resigning. The worst-case outcome is that the employment contract is deemed never terminated, leaving the company facing the risk of reinstating the employment relationship and paying all back wages. Furthermore, if the company does not actually have legitimate grounds for disciplinary dismissal under Article 12 of the Labor Standards Act, using it as a threat constitutes an unlawful connection between means and purpose, significantly increasing the risk of rescission.
The Story’s Premise
This article is based on the following hypothetical scenario and is not directed at any specific case:
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The company is a Taiwanese company subject to the Labor Standards Act
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The company has work rules approved and filed with the competent authority
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The employee’s specific violation has been confirmed
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The company intends to negotiate with the employee using a “voluntary resignation or disciplinary dismissal” binary choice
Operational Process
The typical negotiation process is outlined below. Of course, variations can be quite diverse — depending on the employee’s personality, the supervisor’s personality, the company’s culture, the industry the company operates in, and the characteristics of the contract, many adaptations are possible. Whether delegating to in-house legal, HR, or external lawyers; choosing a location inside or outside the company; the duration of the negotiation; where to start the conversation; whether to appeal to emotion or reason — these are all techniques that can be employed.
The following describes the most common and straightforward approach.
Step 1: Internal Decision
Company management decides that a certain employee should leave the company and plans to adopt a “first counsel to resign, then dismiss if unsuccessful” strategy.
Step 2: Meeting Arrangement
The company brings the employee into a private room for a meeting conducted by a supervisor or HR personnel.
Step 3: Communication Content
During the meeting, the company presents the employee with two options:
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Option A: The employee voluntarily submits a resignation letter, and both parties handle it as a mutual termination of the employment contract
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Option B: If the employee is unwilling to resign voluntarily, the company will initiate disciplinary dismissal proceedings (under Article 12 of the Labor Standards Act)
Step 4: Outcome
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If the employee chooses Option A → The employee signs a resignation letter or separation agreement, and the employment contract is terminated
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If the employee chooses Option B → The company proceeds with disciplinary dismissal under Article 12 of the Labor Standards Act
Distinguishing Between the Two Modes
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Mode A (Mutual Termination): Both parties mutually agree to terminate the employment contract. The employee’s declaration of intent is voluntary resignation, and the legal effect is mutual termination. In principle, the employee cannot claim severance pay (unless otherwise agreed).
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Mode B (Disciplinary Dismissal): The employer unilaterally terminates the employment contract under Article 12 of the Labor Standards Act. The legal effect is unilateral termination by the employer. The employee has no right to claim severance pay, but the employer must prove that the statutory grounds are met.
Legality Analysis
I. Legality Analysis of “Mutual Termination of Employment Contract”
Basic Principle: Mutual Termination Itself Is Legal
Beyond the statutory grounds under Article 11 (layoff) and Article 12 (disciplinary dismissal) of the Labor Standards Act, both employer and employee may mutually agree to terminate the employment contract based on the principle of freedom of contract. This falls within the scope of private autonomy and is not prohibited by law.
Core Issue: Whether the Employee’s Declaration of Intent Was Made of Free Will
The premise of mutual termination is that both parties act with genuine intent. If the employee’s “consent” was given under duress, then that declaration of intent is defective.
II. Does Using “Disciplinary Dismissal” as a Bargaining Chip Constitute “Duress”?
Key Point: Whether Grounds for Disciplinary Dismissal Actually Exist
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If the company genuinely has legitimate grounds for dismissal under Article 12 of the Labor Standards Act: Informing the employee that “you have grounds that warrant disciplinary dismissal, the company can choose to dismiss you, but is also willing to give you the opportunity to resign voluntarily” — the means (informing of a legitimate right to dismiss) and the purpose (negotiating resignation) have a reasonable connection, making it less likely to be deemed duress.
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If the company does not actually have legitimate grounds for dismissal under Article 12 of the Labor Standards Act: Using a non-existent right to dismiss as a threat to force the employee to comply — the means (a fabricated right to dismiss) and the purpose (forcing resignation) lack a legitimate basis, making it highly likely to be deemed duress.
III. Legal Requirements for Disciplinary Dismissal (Article 12 of the Labor Standards Act)
Even if the company ultimately chooses to proceed with disciplinary dismissal, all of the following requirements must be met:
(1) Statutory Grounds (Article 12, Paragraph 1, Subparagraphs of the Labor Standards Act)
One of the following circumstances must apply:
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False declaration of intent at the time of entering into the employment contract (Subparagraph 1)
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Violence or gross insult against the employer or related persons (Subparagraph 2)
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Conviction with a sentence of imprisonment or above that has become final (Subparagraph 3)
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Violation of the employment contract or work rules of a serious nature (Subparagraph 4) — most commonly used
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Intentional damage to the employer’s property or disclosure of confidential information causing harm (Subparagraph 5)
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Unexcused absence from work for three consecutive days or six days within a month without justifiable reason (Subparagraph 6)
(2) Practical Standards for the Most Commonly Used “Serious Nature” Determination
Courts will not simply accept at face value that a behavior listed in the work rules warrants dismissal. Instead, they will actually examine:
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The nature and workplace culture of the industry
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The specific impact of the violation
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Whether the violation is attributable to the employee
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Whether the employee was afforded necessary procedural protections (such as the opportunity to defend themselves)
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Whether progressive discipline was followed (warnings and demerits first, dismissal only as a last resort)
(3) Principle of Last Resort
Dismissal is the most severe disciplinary measure. The employer must demonstrate that no other less severe alternative measures are available. If the matter can be addressed through warnings, reprimands, demerits, or demotion, those measures should be prioritized.
(4) 30-Day Prescriptive Period
The employer must exercise the right to dismiss within 30 days of becoming aware of the employee’s violation. The right to dismiss is forfeited if this period is exceeded.
Scenario Analysis
After reading all the complex descriptions above, things may be a bit unclear. To help everyone understand more quickly, we have organized the analysis into the following scenarios:
Scenario 1: The Company Genuinely Has Legitimate Grounds for Dismissal (The Employee Has Committed a Serious Violation)
Premise: The employee has indeed violated the employment contract or work rules in a manner that is serious in nature, and the company has sufficient evidence.
Scenario 1-A: Offering the opportunity for voluntary resignation in good faith, based on legitimate grounds
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Explanation: Based on confirmed violations, the company gives the employee the option to resign voluntarily before formally initiating dismissal proceedings, allowing the employee to preserve a better separation record. The meeting is conducted with sincerity, facts are fully explained, reasonable time for consideration is given, and no pressure is applied.
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Result: Generally feasible. The company is truthfully informing the employee of its legitimate right (the right to dismiss) and offering a more favorable option. The employee’s declaration of intent is less likely to be deemed made under duress.
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Risk Level: Medium-Low
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Likelihood: This is the most common and relatively safe operational approach in practice. However, risks remain — if the employee later claims the meeting environment was coercive (enclosed space, multiple supervisors present, no time given for consideration, etc.), the court may still find that it constituted de facto duress.
Scenario 1-B: Based on legitimate grounds, but applying undue pressure during the meeting
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Explanation: Although the company has legitimate grounds, pressure is applied during the meeting through intimidating tone, time-limited responses, or implications that non-cooperation will lead to more severe consequences (such as reporting to industry peers, affecting credit records, etc.).
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Result: Even if the grounds for dismissal are legitimate, undue pressure may still render the employee’s resignation declaration as made under duress.
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Risk Level: Medium
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Likelihood: If the employee later files a lawsuit, the court will comprehensively examine all circumstances of the meeting.
Scenario 2: Using a Non-Existent Right to Dismiss as Leverage to Request Voluntary Resignation (Employee’s Violation Does Not Reach “Serious Nature” or There Is No Violation at All)
Premise: The employee’s conduct does not meet the “serious nature” threshold under Article 12 of the Labor Standards Act, or the company cannot provide proof.
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Explanation: The company tells the employee “if you don’t resign voluntarily, we will dismiss you under Article 12 of the Labor Standards Act,” but the company does not actually have legitimate grounds for dismissal. This constitutes using a fabricated exercise of rights as a threat.
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Result: Not recommended. In this scenario:
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If the company still proceeds with dismissal, it is invalid due to the lack of statutory grounds
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Under Article 37 of the Labor Incident Act, the court may order the employer to continue employment during litigation
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Risk Level: High
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Likelihood: This is the most common type of dispute in labor litigation. Courts are increasingly strict in their scrutiny of such practices, and employees have a high success rate.
Conclusion — Preparation Starts Before the Meeting
Having discussed all of this, these are all assessments of the legal effects after the meeting. To achieve a good meeting outcome — and even to be in an unassailable legal position — the following information must be prepared before negotiating with the employee, and multiple simulation exercises should be conducted to familiarize yourself with the employee’s possible reactions. Senior management in particular must be especially cautious, ensuring that both the company and the employee can part on good terms.
Remember to complete these preparations before the meeting.
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Fact-Finding: Complete the investigation of the employee’s violation and confirm whether it meets the threshold under Article 12 of the Labor Standards Act
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Evidence Preservation: Collect and preserve all relevant evidence (written records, system logs, witness statements, etc.)
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Legal Assessment: Have in-house counsel or external lawyers assess the likelihood of prevailing in a disciplinary dismissal case
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Plan Design: Prepare the terms for a mutual termination package (including compensation amount, separation date, reference letter, etc.)
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Document Preparation: Prepare meeting record forms and mutual termination agreement templates